Draft FIC Act regulations on cash and EFT transactions released for comment
Draft money laundering and terrorist financing control (MLTFC) regulations have been released for comment by 1 April 2019. According to the Government Notice, the draft MLTFC regulations will amend regulations on cash transactions above a prescribed threshold (s 28 of the 2001 Financial Intelligence Centre Act), and operationalise s 31 of the Act, which focuses on ‘moving funds electronically across the borders of SA’. Both sections 28 and 31 deal with the reporting obligations of accountable institutions conducting transactions on behalf of their clients.
Summarising the draft regulations, a National Treasury media statement among other things notes a proposal to double the cash transactions threshold, ‘dispense with the aggregation requirement’ and increase the reporting timeframe. Regarding cross-border electronic fund transfers, it is envisaged that any transaction of R5000 or more should be reported to the Financial Intelligence Centre (the Centre). Both proposals are made in the context of issues unpacked in an accompanying consultation paper.
The Centre has also issued two draft guidance notes for comment. Draft Guidance Note 104 relates to international funds transfer reporting, and Draft Guidance Note 05C relates to cash threshold reporting.
Notes
The Centre has embarked on a process to bring s 31 of the Financial Intelligence Centre Act 38 of 2001 (FIC Act), into operation. Section 31 requires those accountable institutions that move funds electronically, across the borders of South Africa, on behalf or on the instruction of another person, to report the information that is prescribed by regulation pertaining to a transaction through which funds are transferred, to the Centre. The s 31 report is to be called an 'International Funds Transfer Report' (IFTR). This consultation paper seeks to elicit comments on a number of aspects relating to the implementation of this reporting obligation.
The Centre is also considering how the implementation of reporting on cash transactions pursuant to s 28 of the FIC Act can be improved.
The obligation to submit an IFTR will be triggered by the fact that a transaction has taken place by means of which an amount of funds exceeding a prescribed threshold have been transferred electronically into or out of South Africa. Examples of transactions of this nature include remittances through which funds are sent or payments are made to persons located outside of South Africa, remittances through which persons in South Africa receive funds (including payments) from persons located outside of South Africa, credit and debit card transactions with a merchant located outside of South Africa and credit and debit card transactions by a person located outside of South Africa with a merchant in South Africa.
When s 31 of the FIC Act comes into operation, s 56 of the FIC Act will also take effect. Section 56 deals with the failure of accountable institutions to report electronic transfers. A person that fails to report such transactions may be found guilty of an offence or may be found non-compliant and subject to an administrative sanction. Section 68 of the FIC Act states that a person convicted of such offence is liable to imprisonment for a period not exceeding 15 years or to a fine not exceeding R100 million.
On cash transactions it is proposed that the prescribed threshold amount that should trigger a cash transaction report be increased to R49 999,99. This means that the obligation to report information concerning cash transactions in terms of s 28 of the FIC Act will arise when a transaction is concluded with a client by means of which cash in the amount of R50 000,00 and above:
- is paid by the accountable or reporting institution to the client, or to a person acting on behalf of the client, or to a person on whose behalf the client is acting; or
- is received by the accountable or reporting institution from the client, or from a person acting on behalf of the client, or from a person on whose behalf the client is acting.